The Pentagon said yesterday it will delay collecting $1.35 billion in contested contract refunds on the A-12 stealth jet from McDonnell Douglas Corp. and General Dynamics Corp. while the companies challenge the government's claim in court.
Defense Department spokesman Pete Williams told reporters the government agreed to the collection delay because of concern about the financial effect on the nation's two biggest defense contractors if the money were collected immediately.
The companies have denied the Navy's conclusion that they had defaulted on the planned $57 billion attack jet program, which was canceled by Defense Secretary Richard B. Cheney last month before the first A-12 was built because of cost overruns and delays.
Williams said the companies would pay interest on the money while they were contesting the claim in court.
"It is not a bailout by any means. They will still be liable for their obligations," he said, calling the delay "a breathing space" for the firms.
"If we don't defer, it is a possibility that we could put these companies in an extreme financial position, which could weaken the industrial base," Williams said. He He noted that McDonnell Douglas makes such key weapons as F-15 and F-8 jet fighters and the Apache helicopter, while General Dynamics builds the F-16 fighter, the M-1 tank and Trident submarine.
The two companies are seeking to have the A-12 contract terminated for reasons other than default on their part, which would allow them to recover some of their costs, including money that the Navy wants back.
McDonnell Douglas, assuming that the termination would be for convenience, said earlier it took a $219 million after-tax charge on the program.
General Dynamics took a $450 million pretax charge on the program in the second quarter of 1990. The company yesterday reported a loss of $530 million in the fourth quarter of 1990, compared with a profit of $82.8 million a year earlier.
Cheney announced Jan. 7 that he was canceling the A-12 program, and the following day Williams said the government would seek a total of $1.9 billion from the two companies. But he said yesterday that a review of the matter showed the firms only owed the government $1.35 billion.